HK and China stocks deepen losses after across the board sell-off on Federal Reserve stimulus warning

25-Sep-2020 Intellasia | South China Morning Post | 6:02 AM Print This Post

Hong Kong and China stocks fell, taking cues from a sell-off in US equities, amid fears that policymakers are not doing enough to support further economic recovery and a resurgence of the coronavirus pandemic will derail growth.

The Hang Seng Index declined further as the sell-off gained momentum, losing 1.8 per cent, or 422.97 points, to 23,319.54 at the break on Thursday. The mainland’s Shanghai Composite Index declined 1.5 per cent to 3,231.78.

Other major markets in Asia all headed south, with South Korea’s Kospi index tumbling almost 2 per cent, making it the region’s worst performer. The S&P 500 slumped to an eight-week low in overnight trading, extending its loss to 10 per cent from a recent high. A 10 per cent drop is typically seen by some technical traders as entering a correction. Other asset classes from crude oil to gold all slipped, while investors snapped up the US dollar as a haven, setting a gauge of the American currency on course for its biggest monthly gain since April.

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While Federal Reserve chair Jerome Powell said earlier that the world’s largest economy has a long way before fully recovering and requires more support, the chance of a new fiscal stimulus seems to be fading before a contentious presidential election. Meanwhile, a recent increase in rising cases of Covid-19 in the US and other nations added to the weak sentiment, with some European countries imposing more social distancing measures.

“Fading prospects for US fiscal stimulus and the stepping up of mobility restrictions on concerns about the second wave of Covid-19 are smacking global stock markets again,” said Stephen Innes, a strategist at AxiCorp. “Risk market losses, especially US equity losses, signal that all the possible juice that can be extracted from declining real rates has already been squeezed.”

The sell-off was across the board in Hong Kong, with 48 out of the 50 members on the Hang Seng Index falling. Wuxi Biologics and smartphone maker Xiaomi topped the list of decliners, falling at least 4 per cent.

On the mainland, sub-gauges tracking industrial and commodity stocks were the worst performers among the industry groups, sinking more than 2 per cent.

Zhengzhou Sino-Crystal Diamond shed 14 per cent to 6.16 yuan in Shenzhen after the bourse restricted the trading of a retail investor who was found to have manipulated the stock last month.

All the four IPO debutants Beijing TopNew Info&Tech, Zhejiang Songyuan Automotive Safety Systems, Pinlive Foods and Friend Co. surged on the mainland’s exchanges. Beijing TopNew, an operator of internal data centres, was the best performer, jumping 465 per cent from its offer price to 71.50 yuan on Shenzhen’s ChiNext board. Zhejiang Songyuan, an car parts maker, surged 213 per cent to 42.10 yuan. Pinlive Foods, a food retailer, gained 189 per cent to 77.03 yuan, while Friend, which provides steel logistic supply-chain services, climbed 44 per cent to 15.70 yuan.


Category: Hong Kong

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